What is Chainlink? In-depth Analysis of Chainlink (LINK)

I. What is Chainlink?

Chainlink (LINK) is a cryptocurrency and technology platform that allows non-blockchain firms to connect to blockchain platforms in a safe manner. Chainlink is a piece of software that connects blockchain-based smart contracts to external data sources such as baseball scores or market prices. Chainlink’s LINK currency compensates network operators and serves as collateral for the network’s smart contract agreements.

Chainlink is a blockchain abstraction layer or decentralized oracle network. Chainlink use blockchain technology to protect calculations on and off-chain, enabling what the company refers to as hybrid smart contracts. Chainlink allows businesses to connect to any major blockchain network, including Ethereum and Solana.

The Chainlink blockchain is hosted on the Ethereum platform and operates on the proof-of-stake protocol. Furthermore, Chainlink is an open-source blockchain project, which means that anybody may examine and contribute to its code.

II. History of Chainlink

Chainlink was founded in 2014, although it did not go public until 2017. Sergey Nazarov, a 32-year-old entrepreneur with a significant presence in the cryptocurrency sector, is its founder. Originally, the Chainlink network was intended to be a centralized oracle system capable of validating incoming data. It has now evolved into what it is today: a decentralized oracle network that works in tandem with smart contracts to offer safe transactions using external data sources and APIs.

Chainlink is a somewhat open system. In reality, anybody may join it, provide data to the network, or fulfill Chainlink “jobs” by assisting in the operation of its linked nodes and oracles. These operators are compensated with LINK tokens, the Chainlink network’s internal currency. Operators can additionally stake LINK tokens when servicing smart contracts to receive additional money.

When Chainlink’s LINK tokens initially appeared on the market in 2017, they were worth slightly over a penny in USD. The market capitalization of the coin was likewise understandably low.

Prices remained low for a time, selling at less than a dollar a token until mid-2019 when they began trading at between $1 and $4 per token. However, by the latter part of 2020, the price of LINK tokens had risen to well then $14. LINK hit an all-time high price of over $37 per token in February 2021.

While there is a significant price increase, cryptocurrencies have grown in popularity over that period. It’s vital to understand that, while LINK tokens may be held as an asset, they can also be used to pay for smart contracts on the Chainlink network.

III. Striking Features of Chainlink (LINK)

The Chainlink blockchain can facilitate the safe exchange of inputs, outputs, and calculations. Chainlink has the following features:

Reliable, tamper-proof network: The platform connects extremely accurate data/APIs to any smart contract using decentralization, trusted nodes, premium data, and cryptographic proofs. API (application programming interface) allows businesses to exchange data and functionality from their apps with third-party developers, commercial partners, and internal departments.
Seamless connection to any API: Create a framework for getting data from any API, connecting to existing systems, and integrating with any current or future blockchain.
Proven, ready-made solutions: Integrate pre-built, time-tested Oracle solutions that have already assisted market-leading decentralized apps in protecting smart contract value.
Secure off-chain computation: Use a decentralized network of Chainlink nodes to automate contracts, removing the need for manual intervention and centralized servers.

As per the whitepaper, the platform is constructed on decentralized oracle networks or DONs for short. A DON is a Chainlink network maintained by a committee of nodes and fulfills functions as decided by the committee. DONs are intended to extend and expand the capabilities of smart contracts on a specific blockchain by offering additional functionalities than are natively provided. DONs achieve this by securing the three fundamental computing resources: networking, storage, and computation.

In terms of the token, LINK is the platform’s native token. LINK tokens can be used to compensate Chainlink node operators. The token attempts to fund the platform’s expansion while also incentivizing users to produce new tokens. LINK tokens can be used to compensate node operators for their services. Chainlink node operators stake LINK in the network to demonstrate their dedication to the network and to reward excellent service. The network is also managed via LINK. As a result, nodes with a bigger stake are more likely to be selected to fulfill data requests (and thus earn LINK tokens for their services). Likewise, the Chainlink network penalizes erroneous or dishonest nodes by charging their LINK stake.

IV. Core Technology of Chainlink (LINK)

Chainlink obtains the needed data from several nodes. Before returning the data to the smart contract, they reach an agreement. As a result, the smart contract is not dependent on a single oracle. Furthermore, Chainlink nodes may perform data retrieval activities both once and numerous times. Data receipt may be planned, transforming Chainlink nodes into data streams for smart contracts.

The Chainlink network is divided into two interactive components: on-chain and off-chain.

1. On-Chain Component

Chainlink’s on-chain component is made up of Ethereum blockchain oracle contracts. They monitor and process data requests from consumers.

When someone requests off-chain data, they send the request (contract) to the Chainlink network, where it is converted into a native blockchain contract. These Chainlink contracts then match the request with an appropriate oracle service. A reputation contract, an order-matching contract, and an aggregating contract comprise the Chainlink contracts.

The reputation contract records oracle-service-provider performance metrics and checks its track record.
The order-matching contract logs the user’s proposal on the network collects bids from the oracle providers and selects them according to the reputation contract analysis.
The aggregating contract collects all the oracle providers’ responses and computes the final collective answer to the original query.

Chainlink’s on-chain unit follows a three-step process when these contracts are active:

Select an oracle
Report the data
Aggregate the results

User contracts might also charge Oracles a penalty cost for providing incorrect or misleading information. It encourages oracles to give fair and consistent service.

2. Off-Chain Component

The second critical part of Chainlink architecture consists of off-chain oracle nodes that connect to the Ethereum network.

These nodes are responsible for collecting replies to external queries. Individual replies are aggregated using numerous consensus techniques before being combined into a single, trustworthy global response and processed into a contract. Chainlink Core, the critical component that connects the blockchain and off-chain data resources, processes the collected data. The Chainlink Core is the device responsible for converting off-chain data and sending it to an on-chain oracle.

LINK is used to compensate off-chain nodes. They also enable the incorporation of external adapters built by developers to conduct various subtasks, making data collecting far more productive.

Chainlink nodes are already in place alongside public blockchains and private company networks. The Chainlink network’s primary goal is to enable them to be run decentralized.

3. Chainlink Decentralized Oracle Service

Oracle protocols are traditionally centralized. They present a possible point of failure for smart contracts that must rely on the oracle to execute their software. Nothing, however, precludes someone from tampering with centralized Oracle protocol data. It has the potential to be utilized to influence beneficial results.

Chainlink handles it through source and oracle distribution. Oracles may pull data from various sources to retain a high reputation thanks to source dispersal. Requests to the Chainlink network are sent to many oracles using Oracle distribution.

The approach also keeps oracles honest since their data is compared to that of other oracles. If an oracle begins to push erroneous data, the network promptly punishes it and ruins its reputation (along with other penalties).

As a result, the network provides a completely decentralized method that ensures high-quality data given by numerous oracles and agreed upon by the consensus process.

Chainlink proposes a decentralized oracle network. The decentralized oracle approach limits reliance on a single source of data.

There are several use situations where decentralized Oracle services might be quite useful:

Next-generation securities contracts like bonds, interest rate derivatives and other agreements need access to APIs to retrieve the latest market prices, interest rates, and other reference data.
Trade finance smart contracts that need access to data from supply chain systems, customs, and GPS data on shipments.
Insurance smart contracts. They are likely to use IoT data feeds related to insurable events. For example, in case of robbery, it would be possible to check whether the warehouses’ door was locked, or, in case of fire, they could retrieve the latest data from fire detection systems.

V. What is LINK?

1. Detailed Information about LINK

Chainlink’s native token is LINK. The token, which is comparable to Bitcoin (BTC) and Ethereum, is intended to assist finance the project’s expansion (ETH). Both of these coins operate on their own blockchains. LINK, like BTC and ETH, serves as an incentive for users to mine.

Furthermore, LINK tokens are used to reimburse node operators for retrieving data for smart contracts and deposits required by contract developers in an honest manner. The LINK token is an ERC677 token that allows data payloads to be inserted in token transfers and borrows functionality from the ERC20 (issued on the Ethereum network) token standard.

To become a node and contribute data to Chainlink oracles, holders must invest LINK tokens into a smart contract. This acts as a disincentive to misbehaving or providing fictitious data to the network.

2. LINK Allocation

The LINK token sale began on September 19th, 2017, with a hard ceiling of $32 million. The LINK token was offered at $0.09 per token during the pre-sale, with a 20% bonus depending on when the investor participated. LINK was sold at $0.11 per token in the subsequent public sale. Both sales distributed 350 million LINK. 1 billion LINK tokens were first produced and distributed as follows:

35% was allocated to the token sales investors.
35% was reserved for Node Operators and ecosystem rewards that will be distributed to incentivize network participants.
30% was allocated to LINK’s parent company, SmartContract.com.

4. Use Cases of LINK

In the Chainlink network, the LINK token is used to reward Chainlink Node operators for retrieving data from external data sources, converting it to blockchain readable format, off-chain computing, and uptime assurances.

For example, if a business wishes to employ a smart contract upgraded with a Chainlink node, it can only do so with LINK tokens. The ultimate pricing is determined by the Chainlink Node Operator based on the demand for the off-chain resource and the availability of similar information.

VI. How to earn & own LINK?

Many exchanges, including but not limited to Binance, Coinbase & Gemini support the Chainlink token. You may trade fiat cash, such as USD, for LINK here.

To accomplish this, you must first open an account with one of the safe and dependable centralized exchanges. Verify your identity by giving any kind of identification.

You may also purchase LINK using a debit or credit card. Some online wallets, such as Skrill, and international payment networks, such as Swift, make it simple to acquire LINK tokens.

Decentralized Exchanges also make it simple to purchase or trade other cryptocurrencies for LINK tokens.

Finally, because it is an Ethereum-based token, you may buy LINK using any Ethereum Wallet — MetaMask & TrustWallet. These wallets also enable it simple to exchange LINK for any other cryptocurrencies stored in your wallet.

VII. Which Crypto Wallets are suitable for LINK?

Here is the list of popular and best Chainlink (LINK) wallets:

Bread Wallet
Trust Wallet
MetaMask
Coinbase
Ledger Nano S/X
Atomic Wallet
CoinBox Wallet
Trezor Wallets
Coinomi Wallet
imToken

VIII. LINK Recent Developments

Chainlink’s annual Smartcon conference will be held in late September 2022. The oracle announced that SWIFT is using its Cross-Chain Interoperability Protocol (CCP) as an initial proof of concept. According to Chainlink, CCIP will enable the SWIFT network to become interoperable across different blockchain environments.

A new initiative called SCALE (Sustainable Chainlink Access for Layer 1 and 2 Enablement) was also introduced. This will allow blockchain projects to offset the operating costs of oracle networks. The Chainlink BUILD Program was also announced, which will focus on supporting early-stage and established projects within the Chainlink ecosystem.

Coinbase Cloud collaborated with Chainlink to launch NFT Floor Pricing Feeds which can be used to track the floor prices of the top NFT collections. CF Benchmarks partnered with Chainlink to launch the CF Bitcoin Interest Rate Curve (CF BIRC).

“The introduction of CF BIRC seeks to enable more predictable lending and borrowing, increased capital efficiency, and a more robust foundation upon which digital asset derivatives markets can grow. Importantly, CF BIRC also seeks to enable financial institutions to participate in digital asset markets by providing a standardized benchmark for Bitcoin interest rates,” said Chainlink.

On September 27, 2022, Coindesk announced that Chainlink will collaborate with Galaxy Digital to give reference spot prices of cryptocurrencies to blockchains. A week later, it was announced that quantitative hedge fund Two Sigma Securities will collaborate with Chainlink to supply data on swaps, options, and other derivatives.

Another piece of current Chainlink news:

Open Earth Foundation received a Chainlink Grant on 15 July 2022 to develop an oracle node that delivers open-access integrated assessment models for carbon pricing.
Chainlink announced multiple integrations of its services across various chains and protocols in July 2022. These included Ethereum layer-2 Optimism, Solana NFT marketplace Solanart, and Cardano-based DeFi network COTI, among others.
Chainlink DON Hyphen made greenhouse gas flux data from European Union’s space program Copernicus available to blockchains on 30 June 2022.
Analytics firm LexiNexis Legal & Professional launched a flight status data-tracking Chainlink node on 29 June 2022.
Chainlink reported on 27 June 2022 that it has more than 1,000 oracle networks deployed across a number of blockchain networks
Chainlink Foundation announced on 27 June 2022 that it expects not more than 5% of the total LINK supply, or 50 million LINK tokens, to be moved into circulation in the next nine months. The release of LINK tokens will support the staking launch and oracle network rewards.
Chainlink announced its phased Chainlink Staking roadmap on 7 June 2022.
On 4 August 2022, Chainlink announced seven new features within its Chainlink Keepers ecosystem, which are expected to help developers innovate faster, offload complex automation challenges off-chain to save money and benefit from improved network security.
In August 2022, the blockchain oracle reported 71 integrations of its services across various blockchains including Ethereum, Polygon, BNB Chain, Avalanche, Fantom, and more.

IX. Teams, Funds & Partners of Chainlink (LINK)

1. Team

2. Investment Funds

3. Partners

X. Where is Chainlink (LINK) information to be updated?

Currently, Crypto users can fully consult, research, and analyze information about Chainlink (LINK) through famous media newspapers such as Nasdaq, Bloomberg, Forbes, AP News, Yahoo!Finance, CoinTelegraph, Coindesk, Kraken…

These media are constantly updated with useful information, new activities, outstanding events of Chainlink, and all the topics surrounding it. Accordingly, Meta Lion Ventures continuously updates the topic of outstanding projects in Blockchain and hot events organized between Meta Lion & partners.

XI. FAQs about Chainlink (LINK)

What exactly is Chainlink and why is it so important?

Chainlink is a decentralized oracle network that uses smart contracts to transport data between blockchains and other networks. It establishes a secure and dependable network for connecting on-chain and off-chain data.

Interaction between blockchain and the outside world was always a problem prior to Chainlink. The platform connects the two by establishing a secure, decentralized network of oracles that gather data from data feeds, combine it, and give correct data to the smart contract.

The Chainlink network validates transactions in what way?

Chainlink is secured by a proof-of-stake (PoS) consensus mechanism. Unlike Bitcoin’s proof-of-work (PoW) consensus, PoS uses the quantity of staked tokens to choose network validators and validate transactions.

LINK is an ERC-20 utility token with an additional ERC-223 function that allows interaction with smart contracts.

You can stake your LINK tokens in a PoS system to validate transactions and add them to the Chainlink network. In exchange, you get LINK tokens for each transaction block you validate.

The Chainlink PoS protocol selects a validator node depending on the number of LINK tokens staked in the network to validate transactions.

How to Invest in Chainlink (LINK)?

Trading Chainlink lets you speculate on the LINK token’s volatility. Chainlink traders may use Crypto CFDs to purchase and sell LINK on brokerages like Axi.

Follow the procedures below to trade Chainlink:

Investigate the present and historical price fluctuations of Chainlink.
Create your own trading strategy for LINKs.
To trade LINK, select a cryptocurrency exchange or trading platform.
You may fund your account with either fiat cash or bitcoin.
Put your Chainlink trading technique into action.
To maximize your trading approach, track and manage your portfolio.

Learn more about how to trade cryptocurrency CFDs.

Is Chainlink a good investment?

This article has covered some of the key concepts behind the LINK token and its ramifications. However, it is crucial to mention a few critical issues that investors should consider before making investment decisions:

Chainlink is the unrivaled leader in the Oracle industry. During the development of blockchain technology, the project has seen a lot of success. The initiative is one-of-a-kind and offers a strong tool for developers and enterprises to obtain high-accuracy data from off-chain sources.
Chainlink is a third-party oracle project that occasionally restricts the development of its ecosystem.
Chainlink’s staff is well-known for their prior work with smart contracts. With the release of more decentralized apps, there is a significant need for smart contract services. Their knowledge is invaluable and will undoubtedly aid in the resolution of current and future difficulties.

Conclusion

One of the most advanced features of Chainlink’s next releases will be off-chain networks built on top of oracles. Off-chain networks are designed to relocate the majority of complicated computing processes away from the smart contract platform’s core layer.

For example, as the demand for processing power has climbed, Ethereum’s gas costs have risen, threatening to render the network unusable for smaller transactions. Chainlink 2.0 seeks to assist users in overcoming this issue by making the computing process for DApps more economical and simple.